These Two REITs Combined For 58% Gains In August: The Best Of The Month

August was an excellent month for most real estate investment trusts (REITs), with about 70% of them profitable. The benchmark Vanguard Real Estate Index Fund ETF VNQ followed its strong 7.9% performance in July with another 5.22% gain in August. Investors continued to look forward to FED rate cuts coming in September, and low inflation data throughout the month helped boost REIT prices.

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Twenty-two REITs finished the month with double-digit gains, but two, in particular, stood out among the rest of the sector. Take a look at two REITs that combined for a 58.58% return in August:

American Healthcare REIT

American Healthcare REIT Inc AHR is a newcomer to the REIT sector. The Irvine, CA-based self-managed Healthcare REIT owns and operates a portfolio of 318 properties across 36 states and the U.K. Its 19.45 million square foot portfolio includes clinical health care properties such as medical buildings, senior housing, skilled nursing facilities (SNF) and hospitals. As of June 30, its occupancy rates for the different facilities ranged between 86.4% and 91.7%. Occupancy rates have returned to pre-COVID-19 levels. 

American Healthcare was formed in 2021 and had its IPO in January 2024. 

In addition to some triple-net leases, American Healthcare takes advantage of the 2007 REIT Investment Diversification and Empowerment Act (RIDEA) that allows health care REITs to lease qualified health care properties (QHCP) to a related Taxable REIT Subsidiary (TRS).

On Aug. 5, American Healthcare REIT reported its second-quarter operating results. Funds from Operations (FFO) of $0.33 beat the consensus estimate of $0.28 and improved from the first quarter of 2024 by $0.03. Revenue of $504.58 million missed the estimate of $508.10 million but topped the first-quarter 2024 revenue of $499.53 million. American Healthcare's first earnings report was Q4 2023, so there is no year-ago same quarter for comparison.

Many investors aren't familiar with American Healthcare REIT, and only a few analysts covered it at first. Yet, American Healthcare REIT was the leading REIT in August, with a total gain of 31.30%. 

Year-to-date, American Healthcare’s total return is 62.10%, second only to Iron Mountain Inc. IRM ‘s 65.03% total return among all REITs.

American Healthcare's $1.00 annual dividend yields 4.78% annually, and its payout ratio is 82.6%.

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Clipper Realty

Clipper Realty Inc. CLPR is a small, self-administered, self-managed REIT based in New York City that was formed in 2017 and owns, manages, and operates 11 multifamily residential and commercial properties. 

On Aug. 1, Clipper Realty released its second-quarter operating results. FFO of $0.17 per share beat the consensus estimate of $0.12 by 41.67% and topped Q2 2023 FFO of $0.13 by 30.77%. Revenue of $37.346 million beat the forecast of $36.008 million and was ahead of revenue of $34.543 million from the year-ago same quarter.

On Aug. 2, Clipper Realty declared a quarterly dividend of $0.095 per share, in line with its previous dividend, payable Aug. 22 to shareholders of record August 15. The annualized $0.38 dividend yields 7.72%.    

The dividend is well covered, with a forward payout ratio of 67.86%. Unfortunately, the dividend has remained constant for several years as Clipper Realty has underperformed the general market and its peers. However, there have been no cuts or suspensions. Clipper Realty may be turning around. With the strong Q2 results on a heavily oversold stock, it's no wonder that Clipper Realty was the second-best performing REIT in August, with a total gain of 27.28%. Year-to-date, Clipper Realty has had a total return of -2.89%. 

Other REITs that performed quite well, leading the REIT sector during August, include: 

Mid-America Apartment Communities Inc. MAA up 16.17%, Public Storage PSA Up 16.15%, Vornado Realty Trust VNO up 14.60% and Ventas Inc. VTR Up 14.09%.

Better Yields Than Some REITs?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through REITs.

Arrived Homes, the Jeff Bezos-backed investment platform has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

As long-term rates go down and short-term rates stay high, there’s a unique chance to invest in fix & flip loans before yields drop. Check out Benzinga's favorite high-yield offerings.